In LLCs, what governance structures are possible?

In LLCs, what governance structures are possible?

• A. Board of directors and officers
• B. Member-managed or manager-managed
• C. Sole proprietorship governance
• D. Trustees

Answer: (B)

The governance of an LLC is determined by two main structures: member-managed and manager-managed. In a member-managed LLC, all owners (members) participate directly in day-to-day decisions and operations, making it feel similar to a partnership where every member has a say in running the business. This setup is common for smaller LLCs where owners want hands-on control. In a manager-managed LLC, the members appoint or elect one or more managers to handle daily operations. Those managers can be members themselves or external professionals. The members retain ownership and set broad policy, but the managers run the business day to day under the rules laid out in the operating agreement. This structure is useful when some owners prefer to be investors rather than operators, or when professional management is desired. More traditional corporate terms like a board of directors and officers aren’t the standard governance model for LLCs, though some LLCs may designate officers or even create a board-like oversight if allowed by their operating agreement. Sole proprietorship governance describes a single-owner business, which is a different legal form and not an LLC. Trustees are associated with trusts, not typical LLC governance. So, the key idea is that LLCs can be run directly by the members or run by appointed managers, with the operating agreement governing who has authority and how decisions are made.

The governance of an LLC is determined by two main structures: member-managed and manager-managed. In a member-managed LLC, all owners (members) participate directly in day-to-day decisions and operations, making it feel similar to a partnership where every member has a say in running the business. This setup is common for smaller LLCs where owners want hands-on control.

In a manager-managed LLC, the members appoint or elect one or more managers to handle daily operations. Those managers can be members themselves or external professionals. The members retain ownership and set broad policy, but the managers run the business day to day under the rules laid out in the operating agreement. This structure is useful when some owners prefer to be investors rather than operators, or when professional management is desired.

More traditional corporate terms like a board of directors and officers aren’t the standard governance model for LLCs, though some LLCs may designate officers or even create a board-like oversight if allowed by their operating agreement. Sole proprietorship governance describes a single-owner business, which is a different legal form and not an LLC. Trustees are associated with trusts, not typical LLC governance.

So, the key idea is that LLCs can be run directly by the members or run by appointed managers, with the operating agreement governing who has authority and how decisions are made.